creating value by rehabbing vacant homes and reclaiming ... · vacants to value uses different...

From Vacants to Value Creating Value by Rehabbing Vacant Homes and Reclaiming Blighted Blocks

•  Fifty years of population and job loss has devastated the housing market in many of the City’s lowest income neighborhoods.

•  Baltimore City is plagued by decades of property abandonment resulting in 16,000 vacant and boarded buildings.

•  The majority of Baltimore’s boarded structures - approximately 11,000 - are highly concentrated in severely distressed areas. Unfortunately, there is insufficient development demand in those areas to support wholesale rehabilitation in the foreseeable future.

•  A limited number of emerging markets can be identified within distressed areas. With resource intensive assistance from code enforcement, these emerging markets can support the rehabilitation of 700 vacant properties.

•  The remainder of the abandoned properties - approximately 5,000 - are scattered throughout mostly transitional neighborhoods. These areas have otherwise healthy housing markets that could support the rehabilitation of these vacants.

Baltimore City’s Vacancy Problem

The Distribution and Concentration Of Vacant Buildings in Baltimore City

Breakdown of the City’s 16,000 Vacants by Area Type

65% (10,000+ Vacants)

Located in Areas Without �Development Demand

31%�(5,000 Vacants)

Located in Areas With �Development Demand

4% (700+ Vacants)

Located in Emerging Markets

The New Vacants to Value Approach

•  STRATEGY 1: STREAMLINE THE DISPOSITION PROCESS�Current processes for selling city owned properties are cumbersome, antiquated, and time consuming. Many potential buyers lose financing and others give up in frustration. Strategy 5 will reorganize HCD’s Land Resources Division to consolidate all acquisition, asset management, and disposition activities. Other changes include increasing marketing efforts and policy reforms that will streamline internal processes as well as sales.

•  STRATEGY 2: STREAMLINE CODE ENFORCEMENT ON TRANSITIONAL BLOCKS�On transitional blocks Vacants to Value is a new streamlined approach to code enforcement that does not rely on litigation. Up until now, litigation was required in every instance where a vacant building owner was non-compliant. Code enforcement officers can now issue $900 citations (like parking tickets) which will promote outcomes on a scale previously unattainable.�

Vacants to Value is a new initiative which utilizes the private market to maximize the repair and rehabilitation of blighted properties. Vacants to Value uses different strategies on different blocks depending on the housing market: �

MarketDriven

HousebyHouse

BlockbyBlock

StrongerCity

NeighborhoodbyNeighborhood

The New Vacants to Value Approach •  STRATEGY 3: FACILITATE INVESTMENT IN EMERGING

MARKETS NEAR AREAS OF STRENGTH �On distressed blocks, Vacants to Value is a new public-private partnership that facilitates the rehabilitation of entire blocks without the costs and long timelines associated with conventional approaches. Going forward, strategically deployed code enforcement attorneys will work with committed, capitalized developers to effectively leverage whole block solutions in targeted areas.

Vacants to Value’s Strategies 2 and 3 will trigger the rehabilitation of more vacant, boarded properties than any program to date – with only minimal public subsidies and limited costs.

•  STRATEGY 4: TARGETED INCENTIVES Baltimore City offers a variety of incentive programs for potential

homebuyers. Each program has specific qualifications, managed by different city departments or nonprofits

STRATEGY 5: SUPPORT LARGE-SCALE DEVELOPMENT IN DISTRESSED AREAS�Many distressed areas with concentrated abandonment do not have private development potential and so large-scale redevelopment initiatives are need. The City will continue to support the following redevelopment projects: Uplands, O’Donnell Heights, EBDI, Central Park Heights, Poppleton, and Orchard Ridge.�

•  STRATEGY 6: MAINTAIN, CLEAR, HOLD AND IDENTIFY NON-HOUSING USES�Unfortunately, there is a limit to the scope of Strategies 3 and 5. The scale of the blight in distressed areas exceeds the development demand for housing uses of any kind well into the foreseeable future. �

Demolition, land banking, regular cleaning and securing of the inventory, as well as the active promotion of creative non-housing uses are essential to create value in the long-term.

MarketDriven

HousebyHouse

BlockbyBlock

StrongerCity

NeighborhoodbyNeighborhood

Streamlining the Disposition Process Current processes for selling city owned properties are cumbersome, antiquated, and time consuming. Some potential buyers lose financing and others give up in frustration. Strategy 1 will reorganize HCD’s Land Resources Division to consolidate all acquisition, asset management, and disposition activities. Other changes include increasing marketing efforts and policy reforms that will streamline internal processes as well as sales.�

Vacants to Value STRATEGY 1

Vacants to Value STRATEGY 1 �Streamlining the Disposition Process

Selling City-Owned Vacants

To strengthen our blight elimination efforts we must make it easier for developers to buy vacant buildings and lots from the City’s inventory.

There are three components to our reform efforts 1. Reorganize HCD’s Land Resources Division to consolidate acquisition, asset management and disposition

2. Increase marketing efforts

3. Change policies that impact both internal processes as well as developer transactions

Land Resources Division Reorganization

•  Merger of Acquisition and Disposition staff into one division of HCD

•  Director of Marketing and Community Outreach position created to emphasize proactive marketing –  Team of Community Marketing Agents to work in and for communities,

matching plans and ideas with inventory

•  Director of Land Transactions –  Team of Real Estate Officers to negotiate and complete deals

•  Managing Attorney –  Team of attorneys to strategically acquire properties and to enforce land

disposition agreements


Buying City-Owned Properties Should be:�

Clear •  Searchable inventory •  User friendly on-line application

Predictable •  Set pricing with reserve bid •  Reduced transaction time reduces financial risk

Transparent •  Web-based marketing tool •  Public notice of properties for which offers are received


Lien Abatement The Problem: •  Lien abatement currently take as long as three weeks, requiring no fewer than six

signatures with document couriered between agencies by a real estate officer

The Solution: •  Implement abatement document with electronic signatures

•  Institute policy that would enable administrative abatement of liens on properties acquired by MCC

•  Establish policy that would prevent new liens accruing on MCC properties

•  Add language to lien sheets that would advise prospective buyers of City’s acquisition activity


Inventory Marketing The Problem: •  Only a small fraction of the City’s

salable inventory is available to the public.

The Solution: •  Make property listings

continuously available on the web. No more rolling bid program

•  Online applications •  Just a click away: photos, rehab

cost estimates, neighborhood data, incentive programs, mapping


Pricing Policy Amendment The Problem: •  The City is required to appraise all properties

assessed above $5,000. If the appraisal is higher than the winning bid, the city must renegotiate or seek a special exception. This creates bad faith and lost sales.�

The Solution: •  Valuation waiver for all acquisitions and sales

priced less than $20,000

•  True minimum price will be advertised

•  Time and cost of transactions will be reduced

•  Eliminates risk of bad will when a good faith offer made in a competitive process is denied based on appraisal


Auctions •  Sell City owned properties at auction

•  Pre-qualify bidders to assure financial capacity and rehab ability

•  Reserve bid set by valuation method

•  Schedule in conjunction with Code Enforcement Receivership actions


Follow Up to Assure Positive Outcomes

•  Staff will monitor and strictly enforce deadlines for rehab of properties

•  Integrate functionality of CoBLAM (City of Baltimore Land Asset Management data system) and CHIP (Computerized Housing Inspection Program) to track compliance due dates and permit/inspection activity

•  Strengthen and Enforce language in disposition agreements to allow the City to reclaim properties that are not rehabbed timely by purchasers


Transitional Blocks with Scattered Vacants�Transitional blocks are predominantly occupied but are challenged by a small number of vacant, boarded buildings.

The private housing market is generally healthy enough to support the rehabilitation of vacant property. Typically, only minimal code enforcement efforts are required to prompt rehabs.

Vacants to Value STRATEGY 2 �

Targeting Scattered Abandonment •  On transitional blocks where housing markets are

otherwise healthy, boarded structures are limited to only a few per block. In these areas, effective code enforcement can successfully leverage rehabilitation.

•  While Baltimore City is generally recognized for its sophisticated code enforcement infrastructure, the sheer volume of vacant properties on transitional blocks has to date exceeded the capacity of existing code enforcement resources.

•  By repositioning code enforcement as a prompt administrative process our enforcement capacity will increase leading to significantly greater outcomes.

•  Over the course of the coming year, code enforcement will use new, streamlined processes to target 1,000 vacant buildings on transitional blocks ultimately triggering their rehabilitation and the overall strengthening of these neighborhoods.

Vacants to Value STRATEGY 2 �TRANSITIONAL BLOCKS

New Enforcement Tools


On transitional blocks where the housing market is generally healthy and true abandonment is minimal, new enforcement processes including the Citation Warning Letter and the Vacant Property Citation, will be sufficient to trigger rehabilitation.

•  New tools and business processes have been programmed into code enforcement’s automated business systems.�

•  Within the first 12 months of launch, code enforcement will likely issue more than 1,000 vacant building citations -effectively doubling enforcement capacity while at the same time reducing the wait time for results by more than 50%.


The Code Enforcement�Timeline

Emerging Markets�Large scale redevelopments, such as EBDI, have created potential housing markets in nearby distressed areas. These areas are characterized by high concentrations of abandoned properties, many of which are owned by the City or are in tax arrears.

Because of their potential, private developers are interested in rehabilitating some of these blocks but require the City’s assistance to ensure that their efforts are not undermined by other vacant properties.


Strategic Targeting of Emerging Markets 13 emerging areas have

been strategically targeted in Year One.

These areas constitute 182 blighted blocks and 746 vacant properties.

Code enforcement will partner with more than 20 developers to effect these rehabs.

Vacants to Value STRATEGY 3 �EMERGING MARKETS

Strategic Targeting of Emerging Markets


Breakout of the 746 Vacants Targeted in New Public-Private Partnership

•  While major demolition efforts remain critical to any comprehensive solution in distressed areas, some of these blocks are near enough to emerging areas of strength to generate developer interest. Significantly better outcomes can be achieved through new public-private partnerships with interested developers.

•  By partnering with committed, privately capitalized developers on targeted blocks, code enforcement attorneys can facilitate whole-block rehabilitation even in distressed areas.

•  Where developers have the means to rehabilitate every vacant house on a strategically selected block, they can effectively restart a housing market. Using their expansive toolkit, Code Enforcement attorneys can require every owner of vacant property on a block to either rehabilitate or sell to someone who can. When necessary, attorneys can force the auction of vacant properties that cannot be rehabilitated or sold because they are truly abandoned or “upside down.” As long as there is at least one capitalized developer, the block will be rehabilitated.

•  Strategy 2 does not rely on tax-payer subsidies to create value nor in general does it rely on costly and time consuming municipal acquisition and disposition strategies as a precursor to rehabilitation.

Public-Private Partnerships


Need for Coordinated City Investment�and Services

Ensure adequate street lighting and facilitate the paving of streets, repair of sidewalks and the attraction of new commercial amenities on reclaimed blocks

Allocate additional capital dollars for demolition to eliminate those vacants that impede additional investments

Assign resources from City agencies –  Police –  Streetscaping/Lighting –  Planning

Schedule dates for walk-throughs with applicable agencies


Homebuyers Good Neighbors Program-$500,000 $5,000 five-year forgivable loans for teachers, firefighters, and police officers Assisting 100 Vacants to Value Homebuyers

CDBG Homeownership Program-$300,000 $5,000 five-year forgivable loans Assisting 60 Vacants to Value Homebuyers

Settlement Expense Grants-$250,000 $5,000 loans assisting 50 Vacants to Value Homebuyers

Buying Into Baltimore Program-$200,000 $5,000 grants to qualified trolley tour participants For Vacants to Value Homebuyers (An increase of $2,000 over standard program)

Live Near Your Work Program-$200,000 $6,000 maximum for Vacants to Value Homebuyers ($3,000 City and $3,000 Employer match)

Developers Revolving Loan Fund-$1,000,000 Construction funds for small developers and contractors

* Tax incentives are also available

Vacants to Value STRATEGY 4 � TARGETED INCENTIVES

Large Scale Redevelopment Many distressed areas with concentrated abandonment do not have private development potential and so large-scale redevelopment initiatives are need. The City will continue to support the following redevelopment projects: Uplands, O’Donnell Heights, EBDI, Central Park Heights, Poppleton, and Orchard Ridge.


Supporting Large Scale Redevelopment

Vacants to Value STRATEGY 5 �LARGE SCALE REDEVELOPMENT

Large scale redevelopment remains a critical tool in areas

where the degree of disinvestment and vacancy prohibit market

solutions. These circumstances require transformative

interventions.�

The City will continue to support the following large scale redevelopment projects:�

Uplands, O’Donnell Heights

EBDI Central Park Heights

Poppleton Orchard Ridge

Maintenance, Clearance, Land Banking and Non-Housing Uses Unfortunately, there is a limit to the scope of Strategies 2 and 3. The scale of the blight in distressed areas exceeds the development demand for housing uses of any kind well into the foreseeable future. �

Demolition, land banking, regular cleaning and securing of the inventory, as well as the active promotion of creative non-housing uses are essential to creating value in the long-term. �


Maintenance, Clearance, Land Banking and Non-Housing Uses

Vacants to Value STRATEGY 6 MAINTENANCE & CLEARANCE �

1900 Perlman Place -Recently demolished by Mayor Rawlings-Blake.

Blighted blocks in distressed areas are characterized by high concentrations of vacant properties, many city-owned through default, truly abandoned, or in tax arrears. Generally, the housing market will not support the rehabilitation of these vacant properties and many of these blocks will ultimately need to be demolished. Much of the land needs to be banked and open-space and non-housing uses promoted at least temporarily. Inventory still standing needs to regularly cleaned and secured.

Expected Outcomes and Goals

STRATEGY 1 •  Increase number of properties marketed and available

for purchase to 1,500�

•  Reduce transaction time from offer to settlement by 50%�

•  Increase number of properties sold by 50% in FY 11

STRATEGIES 2 - 3 •  1500 vacant buildings will be rehabilitated as a result of

first year activities (500 in distressed neighborhoods and 1000 in the otherwise healthy markets). Of those, 500 rehabs will be completed in the first year.�

•  $4,000,000 in new revenue after ramp-up ($1,625,000 projected in the first year)

–  $1,500,000 in new revenue from citations issued in the first year. ($750,000 projected collections in the first year)

–  $500,000 in new permit revenue in the first year. –  $2,000,000 in new property and income taxes for

rehabs completed or begun in the first year, after accounting for Rehab Tax Credit ($375,000 projected collections in the first year)�

•  $70,000,000 of leveraged private investment in the housing stock for rehabs completed or begun in the first year ($35,000,000 projected investment in the first year)

STRATEGY 5 • Completion of on-going major redevelopment projects will result in a total investment exceeding 2.87 billion dollars.

STRATEGY 6 • Demolish 500 properties in Year One (City and partners) and clean and board city wide.

Program Metrics

Results will be carefully tracked in Year One and regularly reviewed in biweekly meetings. It is expected that Year Two target areas and goals can be established at the outset of the fourth quarter.

creating value by rehabbing vacant homes and reclaiming ... · vacants to value uses different...

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